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July 12, 2020 edition—Sempra’s ECA Phase 2; Zama’s operation; and Jalisco’s power laws.
Last Week in a Minute or Less
Electric Power & Renewables. Jalisco will have its own power laws; a court revoked a power reform cancellation; and clean energy plants are up 12.19%.
Natural Gas Mid-Downstream & LNG. Sempra is planning to improve Mexico’s ECA Phase 2; Pemex blamed lightning for a subaquatic fireball; and natural gas prices go up with the heat.
Liquid Fuels Mid-Downstream. A US lawmaker is against Pemex’s Deer Park purchase; and the Keystone XL builder will use USMCA to defend itself.
Oil & Gas Upstream. The Sener chose Pemex to operate Zama; and Lukoil got 50% in an Area 4 project.
Government & NGO. The US and Mexico’s trade skyrocketed; analysts forecast 6% growth; and Coparmex said the fiscal reform needs changes.
Déjà vu all over again. Last week’s readers were particularly interested in Sempra’s priorities (Natural Gas Intel – English); Pemex’s flaring (Natural Gas Intel – English); and Mexico and California’s agreement to boost infrastructure (El Financiero – Spanish).
Geopolitics & Trade
The US and Mexico’s trade skyrocketed. The trade between both nations reached US$262.8bn between January and May, a 30.4% growth compared to the same period in 2020 (El Financiero – Spanish). The USMCA is a year old and is the clearest bipartisan example of the previous administration (AG Metal Miner – English).
Keystone XL’s builder will use USMCA to defend itself. TC Energy is seeking $15 billion in damages from the US over the abandoned Keystone XL oil pipeline, saying the Biden administration unfairly discriminated against the project in violation of the US-Mexico-Canada free trade pact (Politico – English).
US and Canada representatives met before visiting Mexico. US Trade representative Katherine Tai and the Canadian Minister of Small Companies, Export Promotion, and International Commerce had a bilateral meeting in private before they traveled to Mexico City to celebrate the first year of USMCA (El Financiero – Spanish).
Political Economy
Analysts forecast 6% growth. According to Banxico’s analysts, the economic re-opening and recovery boosted a growth forecast for 2021 of 5.8%, above the 5.15% prediction made in the previous survey (El Financiero – Spanish).
Analysts expect higher inflation. According to the Citibanamex survey, inflation will close the year at 5.6%, well above the goal set by Banxico at 3% (El Financiero – Spanish). For 2022, inflation is expected to close at 3.69%.
Mexico’s economic recovery is slowing down. The Mexican economy showed a slow recovery between April and May 2021 (El Financiero – Spanish). The trend of manufacturing jobs and the Standard & Poor’s 500 index increased 0.21 and 0.16 units, respectively.
Coparmex says the fiscal reform needs changes. The business sector agrees with the need for important fiscal reform, but it is concerned that VAT fiscal expenses could be eliminated or turned into tax exemptions (El Economista – Spanish).
Legal & Regulatory
A US lawmaker is against Pemex’s Deer Park purchase. US Congressman Brian Babin argued that the state-owned company has a problematic history in its relationship with US companies (El Economista – Spanish). Babin accused Pemex of backtracking from previous contracts, corruption scandals, and corporate disputes.
Jalisco will have its own power laws. After losing US$2bn in investments with the Sener’s new policies, the local government is planning its own power legislation (El Economista – Spanish). The goal is to provide legal certainty in electric energy and guarantee power supply.
A court revoked a power reform cancellation. The court revoked one of the definite suspensions for the Electric Industry Law as its application does not damage the market participants (El Economista – Spanish). The court decided the new law has ambiguous effects.
Market Trends
Clean energy plants contributed 12.19% more to Mexico’s power supply. According to the Program for the National Power System (Prodesen), the installed capacity of clean energy plants grew 12.19% in April compared to the same period in 2020 (El Financiero – Spanish).
Natural gas prices go up with the heat. According to NGI calculations, Mexico’s natural gas imports from the US remain strong and were 6.44Bcf on July 1st (Natural Gas Intel – English). Natural gas production in Mexico totaled 3.84 Bcf/d in May, up from 3.61 Bcf/d in May 2020.
OPEC+ canceled its meeting and the war continues. Saudi Arabia and the UAE failed to agree on the terms of a deal to add 400,000 barrels per day of extra production each month (Platt – English). The dispute centers around the UAE’s demand for its baseline.
Strategy & Operations
Pemex distanced itself from the global energy model. The state-owned company decided to lower its crude exports to inject more oil into the national refining system when the international price is the highest. From January through May, exports fell 27.3% while the price of Mexican oil for exports increased 62% (El Economista – Spanish).
The Sener chose Pemex to operate Zama. The Mexican administration chose the state-owned company to run the shared oil field Zama over the private consortium led by Talos (Reuters – English). Analysts believe Zama would be a technical and financial challenge (El Economista – Spanish).
Lukoil got 50% in the Area 4 project. The Russian crude producer Lukoil announced an agreement to acquire a 50% operator stake in the shallow water project Area 4 (Platts – English). Lukoil is already involved in blocks 10, 12, 14, 28 and Amatitlan.
Sempra is planning to improve Mexico’s ECA Phase 2. Sempra is looking at ways to lower the cost of a planned expansion of the initial phase of the Energía Costa Azul (ECA) LNG project online in Baja California (Natural Gas Intel – English).
Pemex blamed lightning for a subaquatic fireball. The state-owned company said an intense storm of rain and lightning forced Pemex to shut off pumping stations serving the offshore rig near where the fire occurred, while at the same time, a leak in an underwater pipeline allowed natural gas to build up on the ocean floor, rise to the surface, and ignite with a lightning bolt (9News – English) (El Financiero – Spanish).
Old School Social Goes Viral
(Editor’s note: For the duration of the COVID-19 outbreak, this section will refocus on announcements of event delays or cancellations, events that are moved online, and scheduled webinars and public conference calls. Stay safe!)
Mexico Infrastructure & Sustainability Summit is scheduled for October 27-28.
Mexico Assembly will be held in May, 2022 in Mexico City.
Lateral Thinking
Solar is powering farms. Solar panels are powering up small and medium-sized companies devoted to farm activities. An average cowshed of 50 cows needs between 18,000 and 20,000 kWh per year, and 12-13kWp solar system can generate between 19,000 and 21,000 KWh (El Economista – Spanish).
Quote of the Week
“El político tiene el corazón en el estómago y el filósofo en la cabeza.”
“The politician has the heart in the stomach and the philosopher in the head.”
– José Rubén Romero (1890-1952), Mexican writer and diplomatic.
We hope you have a productive week. Please send any news, comments, or cows powered by the sun to MexicoWeekly@energynarrative.com.
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